Analyze the updated situation of the real estate market in Portugal to get the most out of your investment and avoid getting scammed!

Last Updated on April 16, 2024 by

Investing in the real estate market in Portugal can be very rewarding. The market is increasing in value, and the country offers benefits to investors of any nationality.

But playing an investment in another country can be risky. Knowing well how the market, the country, and the values work is necessary. In addition, you need to have an investor’s mindset.

That’s why Viv Europe, with its years of consultancy experience, has made a complete guide to the real estate market in Portugal. Follow up and be more prepared to make an excellent investment.

Table of Contents

  • Historical analysis of the Real Estate market in Portugal
  • Current situation of the Real Estate market in Portugal
  • Why invest in real estate in Portugal
  • Procedures for property acquisition
  • Costs associated with the real estate transaction
  • Periodic Expenses
  • Tips to avoid being scammed
  • Conclusion

We believe it’s crucial to carry out a brief analysis of the evolution of the real estate market in Portugal over time. By doing that, we’ll have a more in-depth view of the current situation.

We will also talk about the procedure for purchasing property in Portugal and provide some essential tips for anyone who intends to own property in this country.

Finally, we will answer some frequently asked questions related to real estate in Portugal.

Historical analysis of the Real Estate market in Portugal

In order to have more profound knowledge about the current situation of the Portuguese Real Estate market, we need to analyze the path that history took to reach this stage.

Before 2008, the real estate market in Portugal was on its regular course.

At that time, Portugal did not have the international expression it currently has. So the price of the property was considered low, taking into account the European market.

The 2008 Crisis

In 2008, with the so-called subprime crisis, Portugal went through a period of a deep recession.

This crisis, which started in the United States, crossed the Atlantic and hit European countries hard. It caused Portugal to experience stagnation, affecting all productive activity and influencing the price of properties.

According to a report by Banco BPI, the crisis caused a decrease of 10% in real estate prices.

Lisbon real estate market in Portugal

Obviously, we cannot ignore that the European Union aid was essential for this turn, especially considering the loan they granted (that caused the imposition of a restriction policy of credit).

This restrictive policy was Troika.

These measures resulted in the growth of Portugal’s expression in the world.

Despite its little dimension, this country became one of the great European actors.

This spectacular international performance, which encouraged people from all over the world to move to this country, did influence the value of properties that had never experienced such a significant increase.

In 5 years, the price per square meter in Portugal practically doubled and started to compete (in terms of expensiveness) with other European countries, such as Spain and Italy.

It so happens that this increase in value did not reach all of Portugal in the same way.

The more developed and tourist regions, such as Lisbon, Algarve, and Porto, went through this price-raise situation in a much more accentuated way than the rest of the country.

Current situation of the Real Estate market in Portugal

Currently, Portugal has a heated real estate market, with many real estate agencies assisting in buying and selling properties.

However, the mentioned price difference among the different regions of Portugal is still present.

To help you understand, we’ve compiled a table, in alphabetical order, of the average m2 price per region in Portugal. These estimates are from Idealista, which is a renowned real estate website.  

RegionPrice/m2
Aveiro€1,668
Beja€1,054
Braga€1,501
Bragança€872
Castelo Branco€867
Coimbra€1,391
Évora€1,322
Faial (Island)€1,302
Faro€3,251
Guarda€704
Leiria€1,557
Lisbon€3,896
Madeira (Island)€2,888
Pico (Island)€1,362
Portalegre€721
Porto€2,516
Porto Santo (Island)€2,254
Santarém€1,126
São Miguel (Island)€1,636
Setúbal€2,444
Terceira (Island)€1,153
Viana do Castelo€1,457
Vila Real€942
Viseu€1,066

Table prices are from Idealista (as of January 2024).

A quick look is enough to realize that the price of properties in the regions of Faro, Lisbon, and Porto is much higher than in the others. That way, you can better understand the real estate market in Portugal.

Optimistic perspectives

In this sense, it’s worth reading the analysis of Celso Freitas, who specialized in real estate law in Brazil and described the situation by saying:

(…) it couldn’t be different, due to the massive acquisition of properties at prices lower than those found in neighboring countries and considering that the construction of new homes was unable to keep up with the pace of sales, we verified the significant increase in the value of the properties, especially in the most demanding areas.

It’s even mentioned that Portugal would be about to experience a real estate bubble since the value of the properties sold would no longer be in line with their effective price.

Anyway, even with the increase in the price of the real estate market in Portugal, there is still a wide demand for properties precisely because of the benefits resulting from living in this country. 

For this reason, it seems that the increase in the value of real estate portrays a natural phenomenon of improvement in living conditions in Portugal.

According to the international real estate portal Property Guide, Portugal is in 19th position among the 38 countries concerning the price of property per m2.

Considering that this country is one of the most desired to live in, there does not seem to be a discrepancy between the values.

Incentives for real estate investment outside the big cities

The discrepancy in prices among different cities in Portugal is not ideal. After all, the more egalitarian the country is in terms of structure, housing conditions, and cost of living, the better.

However, it generates the possibility of carrying out public policies to develop the country by encouraging housing in less-developed regions.

In this sense, there are lots and lots of policies in Portugal with this objective. We can, therefore, mention a few:

Incentive programs like these are many; however, it’s also necessary for the government of Portugal to develop an adequate housing structure to encourage the citizens to move to these regions.

The real estate market in Portugal

In this sense, we are seeing a greater movement of companies migrating inland due to the tax benefits and also seeking to establish themselves in regions with few or no competitors.

Why invest in real estate in Portugal

Forbes elected Portugal as one of the best countries to live in after the Covid crisis.

That’s because the country of the Pastel de Belém and Porto Wine has many strong points, such as safety and low cost of living. According to the mentioned article, Portugal has the following strengths:

  • Year-round sunshine
  • Safety
  • Good infrastructure
  • International standard Health Care
  • Golf
  • Great beaches
  • Affordable cost of living
  • The Language (English is well-understood)
  • Healthy living
  • Retiree Residency

Due to the mentioned attractions, in addition to many others that the news did not mention, Portugal is becoming a European Star.

If you want to know even more reasons why Portugal is among the trending topics, read our article 8 Reasons That Made Portugal Incredibly Popular.

How can I acquire a property in Portugal?

Finally, the most exciting part of this entire article!

Let’s now tell you about the entire procedure to purchase a real estate property in Portugal, the precautions that you should take, and how to get the best deal possible.

Property search and selection

The search and selection of properties are one of the most important activities related to the acquisition.

In this stage, the buyer or the real estate agent searches for properties on sale, considering the location, property conditions, the internal and external structure, and, obviously, the price.

In Portugal, many websites specialize in this service, such as Kipper Tree, Idealista, Imovirtual, Custo Justo, and Sapo Casas.

It’s also worthwhile to get a professional company like Viv Europe to help you find the perfect property for you. All you’ll need to do is convey your requirements and preferences and let the experts do their magic. 

Real estate due diligence

Real Estate due diligence is one of the main steps before the transfer of the property. Failure to do so may result in the need to pay additional unforeseen expenses or even cancel the real estate transaction.

This procedure consists of a legal analysis of the information and documents related to the seller and the property, preventing, for example, the buyer from carrying out the transaction with a person in bad faith or the acquisition of a property with a real estate liability (such as condominium debts).

real-estate-due-diligence

Therefore, especially at this stage, the individual benefits from a legal analysis by an expert to thoroughly review the business’s information. In this way, the buyer ensures the security in the acquisition. Or even the withdrawal of the business, as the case may be.

You should notice that any real estate liabilities, as long as they are not serious enough to make the transfer of the property unfeasible, may be discounted from the property’s final price.

Documentary Stage

The documentary stage begins.

The parties must agree on the conditions of the promise of the purchase and sale contract. This is when a preliminary installment is normally made to link the seller to the conclusion of the real estate transaction.

Notary offices can (and should) perform many of these procedures so that the documents can have public faith.

If the buyer opts for the acquisition through bank financing, it will be necessary to contract the loan with the financial institution.

This institution may also be a contractual party in the buying and selling contract.

In this contract, the property object of the acquisition can be used as collateral in favor of the bank granting the real estate credit.

From this moment on, paying the fees and taxes levied on the property transaction will be necessary to proceed to the subsequent register transfer through the Deed of Purchase and Sale.

Context of the crisis

In times of confinement, it’s difficult to dedicate ourselves to doing business. Especially due to uncertainty regarding the economic situation in the future.

Saving becomes a necessity (and no longer a possibility) to face this uncertain period.

However, there is nothing to prevent us from striving to envision investment opportunities for the future, as this crisis will sooner or later come to an end.

We will now talk about the activities and costs required to acquire a property in Portugal. The Real Estate sector is very economically attractive, mainly in regions close to large urban centers.

Costs associated with the real estate transaction

Until now, all expenses incurred on the transaction were related to the preparatory stages of this legal transaction. From this moment on, costs are related to the operation itself and are mandatory for the conclusion of the deal.

These are the most relevant costs:

Municipal Tax related to Property Transactions (IMT)

This is a tax that must be paid whenever there is a financial transaction related to the purchase and sale of the property.

It must be addressed to the Portuguese government before the execution of the Deed of Purchase and Sale, and its value varies according to the type of property, location, and purpose.

Its value corresponds to the result of the following equation: Value of the property (property value or deed value, whichever is greater) multiplied by the rate published by the State, subtracted from the portion to be deducted.

Some websites provide a simulator for the value of this tax, as we can see on the APEMIP and Doutor Finanças portal.

Stamp Tax

This tax must also be paid to the State if the property is acquired through bank financing and corresponds to a rate of 0.8% on the value of the transaction.

In the case of Real Estate financing (mortgage loans), this tax is also levied on this amount in the same percentage.

Municipal Property Tax (IMI)

This is a tax on property the owner must pay annually.

This is a continuous expense, and its value varies from 0.3% to 0.8% of the taxable equity value.

In addition to the aforementioned fees and taxes, the buyer must bear the procedural expenses necessary to conclude the legal transaction. Among these, we can highlight the obtaining of necessary certificates to verify the situation of the seller and the property, notary fees, drawing up of the Deed of Purchase and Sale and the registration of acquisition.

Periodic Expenses

After the acquisition of the property, the new owner must pay the expenses incurred on the property.

Therefore, in addition to the IMI, which, as mentioned, will affect the property annually, the buyer must also pay, for example, expenses with condominium, electricity, gas, and water supply.

As you can see, the periodic expenses related to the property are not significant. However, it is important to keep in mind that you must separate this amount since we are dealing with essential services.

Tips to avoid being scammed

Finally, we will pass on some tips that may be useful in the process of purchasing a property and investing in the real estate market in Portugal. This way, you can avoid financial losses in this process, which can be quite stressful.

As mentioned, we recommend hiring a qualified professional. This advice has the sole objective of avoiding further losses by the buyers who believe they can carry out the procedure without legal advice. You can count on Viv Europe for this service.

A well-drafted Purchase and Sale Agreement may be enough to save the property’s value.

Expert lawyers deal with real estate-related demands every day, so malicious sellers are unlikely to deceive them.

Finally, some precautions must be taken into account to avoid being deceived in this procedure.

Always request notarized documents

It may seem basic, but many people are deceived by relying on all documents sent by the seller. Make sure they are original and legitimate documents upon ratification by a local notary office.

Survey the property with a qualified engineer

The false perception that the buyer can identify any defects in the property can be very expensive in the future. Some defects are not visible and can only be detected by specific equipment.

Take your time

Over time, we’ve been able to identify the profile of a seller who is in bad faith. They are usually in a hurry to close the deal, just to disappear.

The acquisition of such a precious asset cannot be done at a fast pace. Perform all activities calmly and carefully. Good opportunities appear at all times, so do not believe that the chosen property is unique.

Search professional records

We have already witnessed many cases in which the person presents themselves as lawyers and goes through the entire property purchase procedure. When a defect in the property is discovered, the alleged lawyers disappear.

Get confirmation of your advisor’s professional record. Much of the information is available on the internet itself.

Speaking of the internet, it costs nothing to Google the name of your advisor.

Property registration

One of the biggest difficulties resulting from the purchase of property remotely is the trouble for the buyers to search the property records on their own account.

Properties without registration, with an expired permit, and without the fire department’s approval, among other cases, cannot be inhabited.

Debts associated with the property

Another situation that happens frequently is the acquisition of real estate with liabilities, that is, debts linked to the property.

In this sense, we have overdue electricity, gas, and condominium bills. Who do you think the companies will charge these debts from?

We can also check the registration of mortgages and real estate financing linked to the asset.

Certainly, there are so many other precautions that the diligent buyer must take. However, the observance of the mentioned activities can avoid a series of inconveniences associated with the purchase of the property.

Conclusion

We hope you enjoyed this guide and feel more prepared to invest in the real estate market in Portugal.

As you can see in this guide, the real estate market in Portugal has been performing well over time.

We also analyzed the property acquisition procedure and the costs to avoid being deceived during the property purchase procedure. Unfortunately, there are many malicious people in this business.

If you’d like to talk to people who have already bought a property, join our Facebook Group – All About Portugal For Expats. A community of over 13,000 people is waiting for you to take this step and fulfill your dream!

And remember, Viv Europe is always here to support you through this journey. Let us help you achieve your wildest aspirations with ease and comfort.

Fill out our ‘Real Estate Form‘ to connect with us.

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